Enterprise Bankruptcy Law — Draft Revision 2025

企业破产法（修订草案）

Sources:

• Chinese full text (PDF): NPC Standing Committee (全国人大常委会)
• Chinese full text (HTML): AllBright Law (锦天城律师事务所)
• Oxford analysis: Xiahong Chen, "A Milestone in the Evolution of China's Bankruptcy Law" (Oct 2025)
• Chambers analysis: Han Kun Law Offices, "Insolvency 2025 — China" (Nov 2025)

No official English translation of the Draft Revision exists. This page provides an analytical overview based on the Chinese text and authoritative English-language analyses. See the full unofficial translation (216 articles) →

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Table of Contents

• Overview
• Structure Comparison: 2006 Law vs. 2025 Draft
• Key Changes
  • 1. Bankruptcy Coordination Mechanism
  • 2. Enhanced Application and Acceptance Process
  • 3. Refined Administrator Mechanism
  • 4. Expanded Avoidance Actions and Claim Priority
  • 5. Out-of-Court Restructuring System
  • 6. Reorganization Improvements
  • 7. MSE Bankruptcy Simplified Procedures (NEW Chapter)
  • 8. Consolidated Bankruptcy (NEW Chapter)
  • 9. Financial Institution Bankruptcy (NEW Chapter)
  • 10. Cross-Border Insolvency (NEW Chapter)
  • 11. Listed Company Bankruptcy Regulations
  • 12. Quasi-Consumer Bankruptcy for Individual Shareholders

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Overview

On September 12, 2025, the NPC Standing Committee published the Enterprise Bankruptcy Law (Draft Revision) (企业破产法修订草案) for public consultation. This is the first comprehensive revision since the EBL's enactment in 2006.

The Draft substantially expands the law:

The Draft was prepared with input from the NPC Financial and Economic Affairs Committee and academic experts including members of the China University of Political Science and Law's Research Center of Bankruptcy Law.

Structure Comparison: 2006 Law vs. 2025 Draft

★ = New chapter in Draft 2025

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Key Changes

1. Bankruptcy Coordination Mechanism

The Draft establishes a bankruptcy work coordination mechanism (破产工作协调机制) at county level and above (Art. 7). Local governments and relevant departments are given clear roles in addressing social stability and credit restoration issues that arise during bankruptcy proceedings. This formalizes the "government-court coordination" (府院联动) approach that has emerged in practice.

2. Enhanced Application and Acceptance Process

• Interim measures: After a bankruptcy application is filed but before the court rules, creditors and debtors can seek to halt enforcement or protective actions to prevent asset depreciation or fraudulent transfers (Art. 11).
• Strengthened obligations: Legal representatives and relevant personnel must hand over property, seals, books, and documents to the administrator. Failure triggers compulsory execution (Art. 17).
• Broader stay scope: The automatic stay upon case acceptance now extends to administrative litigation, tax authority enforcement, and customs actions (Art. 24).

3. Refined Administrator Mechanism

• The administrator is explicitly designated as the principal entity responsible for administering proceedings (Art. 29).
• Creditor-driven replacement: The creditors' meeting can recommend a replacement administrator candidate; the court must accept unless the candidate is disqualified (Arts. 30–32).
• Expanded duties: Administrators must disclose property and management information to creditors, and fulfill tax obligations including filings and invoice issuances (Art. 33).
• Government supervision: A framework for government oversight of administrators is introduced (Art. 38).

4. Expanded Avoidance Actions and Claim Priority

Avoidance actions are substantially refined:

• New categories of voidable transactions added: waiving security on external claims, extending maturity of due claims, disposing of property rights for free, and assuming guarantor/co-debtor roles.
• Extended look-back periods: Transactions with affiliates — 2 years (vs. 1 year for unrelated parties). Fraudulent preferences with affiliates — 1 year.
• Limitation period: The administrator must bring an action within 1 year from discovery of the cause for avoidance (Arts. 42–47).

Claim priority restructured (Art. 162):

1. Personal injury compensation
2. Consumer goods/services essential for sustenance
3. Employee wages and social insurance
4. Tax
5. General unsecured claims

Subordinated debts introduced: loans from family members to individual debtor, post-acceptance interest, subordinated bonds, punitive damages, and claims from unfair affiliate transactions (Art. 162).

5. Out-of-Court Restructuring System

The Draft introduces a formal pre-filing restructuring framework (Arts. 100–102, 120):

• Out-of-court restructuring agreements may be incorporated into the reorganization plan.
• Creditor and shareholder consent to the out-of-court agreement is deemed consent to the corresponding reorganization plan provisions.
• Debtors may apply for a preliminary reorganization plan simultaneously with the reorganization application, provided they meet disclosure requirements and comply with pre-voting procedures.

6. Reorganization Improvements

Key reforms to the reorganization process:

• Priority for new finance: Reorganization financing now ranks immediately below bankruptcy expenses (Art. 56+).
• Public hearings: Optional hearings before case acceptance and before plan confirmation (new).
• Investor participation: Open and transparent recruitment of investors; creditors and shareholders may propose candidates. Investors must submit deposits and maintain confidentiality (Arts. 113–114).
• Shareholder voting: Shareholder votes are only reference points for the court — shareholders can no longer veto the plan.
• Cram-down improvements: Detailed criteria for court approval when creditors reject the plan; the court may hold a hearing before cram-down. Dissatisfied parties may apply for higher-court review (Arts. 123–128).
• Tax treatment: Discharged debt is not treated as taxable income — resolving a longstanding paradox (Art. 139).
• Credit repair: Debtors may apply to government departments, banks, and financial institutions for credit rehabilitation (Art. 139).

7. MSE Bankruptcy Simplified Procedures (NEW Chapter)

Chapter 11 (Arts. 178–183) introduces a simplified procedure for micro and small enterprises (小型微型企业):

• Cases may be adjudicated by a single judge.
• Proceedings must conclude within 6 months of acceptance.
• Creditor claim periods are not bound by standard limits (30 days to 3 months).
• In reorganization, the debtor generally manages its own assets under administrator supervision (DIP model).
• Draft reorganization plans must be submitted within 3 months.
• Shareholders who are crucial to the business and agree to settle debts with future income may retain shares and control.

8. Consolidated Bankruptcy (NEW Chapter)

Chapter 12 (Arts. 184–191) addresses group enterprise insolvency:

Substantive consolidation may be ordered where:

• Corporate personalities are so commingled they cannot be distinguished, impairing creditors' rights; or
• Affiliated enterprises were created for fraudulent purposes.

Applications may be filed by the debtor, shareholders, creditors, or an administrator of an affiliated enterprise. The court at the domicile of the core controlling enterprise has jurisdiction.

Effects of substantive consolidation:

• Inter-company debts are extinguished.
• Assets of all affiliated enterprises are pooled into a common estate.
• Proceeds are distributed to all creditors on a pari passu basis.
• Any reorganization or debt-adjustment plan applies uniformly across the group.

Where substantive consolidation criteria are not met, procedural consolidation (coordinated proceedings without merging estates) remains available (Arts. 189–190).

9. Financial Institution Bankruptcy (NEW Chapter)

Chapter 13 (Arts. 192–201) replaces the single Art. 134 of the 2006 Law:

• Scope: Clarifies which financial institutions are subject to bankruptcy.
• Initiation conditions: Insolvency or regulatory determination that the institution has significantly deviated from regulatory standards.
• Five eligible applicants: Creditors, debtors, regulatory authorities, delegated agencies, and deposit insurance/guarantee funds.
• Jurisdiction: Intermediate people's courts.
• Cooperation obligations: Major shareholders, actual controllers, and beneficial owners primarily responsible for bankruptcy must comply with handover obligations.
• Regulatory measures: Asset verification, creditor verification, and property disposal measures implemented by the financial regulator are effective upon court review and approval.
• Special priority rules: Where other laws provide specific creditor claim ordering for financial institutions, those provisions prevail.

10. Cross-Border Insolvency (NEW Chapter)

Chapter 14 (Arts. 202–206) transforms the single declaratory Art. 5 of the 2006 Law into a comprehensive framework:

• Scope: Chinese courts have jurisdiction over foreign-domiciled debtors where jurisdiction would be more favorable to creditor interests.
• Administrator recognition abroad: The bankruptcy administrator may apply to foreign courts for recognition of the Chinese proceedings and their status.
• Recognition of foreign proceedings is conditioned on:
  1. Proceedings taking place where the debtor has its center of main interests (COMI);
  2. Compliance with PRC laws and public policy;
  3. Non-infringement on national sovereignty and social interests;
  4. Protection of creditors' rights within China; and
  5. Adherence to the principle of reciprocity and absence of discriminatory provisions against Chinese creditors.
• Exclusions: Financial institutions are excluded from cross-border provisions. Foreign tax and social claims are not recognized.
• Domestic priority: Statutory claims within China must be satisfied before distributions to foreign creditors.
• International treaties: Where China has concluded or acceded to international treaties, those treaty provisions prevail.

11. Listed Company Bankruptcy Regulations

The Draft adds specific provisions for listed companies:

• The court must seek the opinion of the CSRC (China Securities Regulatory Commission) before accepting reorganization applications for listed companies (Art. 96).
• The CSRC's input may be considered before determining that a reorganization plan has been fully implemented (Art. 138).
• The China Securities Investor Services Center is authorized to represent investors in filing claims (Art. 81).
• Listed companies undergoing reorganization must comply with securities information disclosure requirements.

12. Quasi-Consumer Bankruptcy for Individual Shareholders

The Draft introduces a limited quasi-consumer bankruptcy framework — a significant step toward personal bankruptcy in China:

• Scope: Individual shareholders of bankrupt companies who are jointly liable for the company's debts (Art. 2). The company must be in bankruptcy proceedings.
• Disclosure: Individual shareholders must fully disclose personal and family assets and submit to supervision (Art. 19).
• Reorganization: Shareholders with predictable future income may apply for reorganization with a debt repayment plan; maximum execution period of 5 years (Art. 98). Supervision period can extend up to 5 years (Art. 174).
• Non-dischargeable debts (Art. 175): Debts from intentional/grossly negligent personal injury, consumer welfare obligations, employee wages, and losses caused to the enterprise.
• Non-dischargeable malicious debts (Art. 176): Violations of bankruptcy regulations, gambling debts, bankruptcy fraud, and responsibility for financial fraud.